ACIT 2(2)(1), MUMBAI vs. INDIAN EXTRACTION LTD, MUMBAI

O R D E R Per G Manjunatha, AM : This appeal filed by the revenue is directed against the order of the CIT(A)-5, Mumbai dated 06-06-2016 and it pertains to AY 2012-13. 2. The brief facts of the case are that the assessee company filed its return of income for the assessment year 2012-13 on 25-09-2012 declaring loss of Rs.2,94,31,153. The regular assessment was completed u/s 143(3) on 30-03- 2015 determining total income at Rs.2,84,29,655 by re-computing long term capital gain on sale of land. Thereafter penalty proceedings u/s 271(1)(c) were 274 r.w.s.271(1)(c) dated 30-03-2015 for furnishing inaccurate particulars of income in relation to computation of long term capital gain from sale of immovable property which is evident from the fact that sale consideration shown in the sale deed and admitted by the assessee in his return of income is lesser than stamp duty value determined by the authorities. The AO further observed that during the year under consideration, the assessee sold an immovable property at Jamnagar for a consideration of Rs.5,33,75,450 whereas the fair market value assessed by stamp valuation authority was at Rs.9,79,42,127. The assessee ought to have computed long term capital gain by taking into account the value fixed for stamp duty purpose as per the provisions of section 50C(2). However, the assessee has not chosen to consider stamp duty valuation authority value. The AO determined the value of the building by referring the valuation to DVO and the DVO has determined the value of the property at Rs.7,32,25,264.

Therefore, he opined that the assessee has furnished inaccurate particulars of income which attracts penalty u/s 271(1)(c) and asked as to why penalty should not be levied for furnishing inaccurate particulars of income. In response to show cause notice, the assessee submitted that there is no furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) as value determined as per the provisions of section 50C(2) does not amount to furnishing of inaccurate particulars of income. The assessee further submitted that deeming fiction provided u/s 50C cannot be extended to levy penalty u/s 271(1)(c) as the AO was not in the possession of any evidence to prove that the assessee has received any extra consideration over and above what is stated in the sale deed. In this regard the assessee relied upon the decision of the Hon’ble Bombay High Court in the case of Fortune Hotels & Estates Pvt Ltd 52 Taxman.com330 (Bom) and the decision of the Hon’ble Calcutta High Court in the case of CIT vs Madan Theatres Ltd 260 CTR 75 (Cal).

The AO, after considering the relevant submissions of the assessee and also relying upon a plethora of judgements held that the assessee has furnished inaccurate particulars of income within the meaning of section 271(1)(c) which attracts penalty and accordingly levied penalty of Rs.94,23,472 being 100% of tax sought to be evaded. Aggrieved by the order of AO, assessee preferred appeal before CIT(A).

5. I had considered the appellant submissions, in this case, A.O. had sold a land in Jamnagar for agreement value of Rs.5,43,75,450/- and long term capital gains on transfer of land was computed at Rs.3,19,60,996/-. However, during the assessment proceedings, A.O. had invoked section 50C substituted the agreement value with the stamp duty value of Rs.9,79,42,127/- instead of agreement value of Rs.5,43,75,450/- under section 50C of the 1.1. Act. A.,O. had referred this value to the DVO which computed the value of the land is Rs.7,32,25,266/-. In this case, in this issue as there is a difference between the long term capital gain computed by the appellant and A.O. On the differential amount A.O. had levied penalty u/s. 271(1)(c).

According to the AO, the assessee has deliberately furnished inaccurate particulars of income in respect of sale consideration of land which is evident from the fact that the value shown in the sale deed and disclosed by the assessee in his return of income is lesser than the value determined by the stamp duty authority for the purpose of payment of stamp duty. The AO further observed that the assessee has shown a sale consideration of Rs.5,33,75,450 whereas the stamp duty value was determined at Rs.9,79,42,127. The AO further observed that the DVO has determined value of the building at Rs. 7,32,25,264. All these facts lead to an undisputed fact that the assessee has furnished inaccurate particulars in respect of computation of long term capital gain which attracts penalty provisions u/s 271(1)(c) of the Act. It is the contention of the assessee that penalty cannot be levied for furnishing inaccurate particulars of income in respect of addition made towards re-computation of long term capital gain by invoking deeming provisions of section 50C of the Act. The assessee further contended that the AO does not have any evidence to prove that the assessee has received any consideration over and above what is stated in the sale deed. In the absence of any iota of evidence that assessee had received more amount than that shown by it in sale deed, penalty u/s 271(1)(c) cannot be levied.

6. Having heard both the sides, we find merits in the arguments of the assessee for the reason that deeming fiction provided u/s 50C for computation of capital gain cannot be extended to the provisions of section 271(1(c) so as to levy penalty for furnishing inaccurate particulars of income. This legal proposition was supported by the decision of Hon’ble Bombay High Court in the case of CIT vs Fortune Hotels & Estates Pvt Ltd 232 Taxman 481 (Bom) wherein it was observed that in terms of section 50C, higher sale consideration of property determined by DVO did not by itself amount to furnishing of inaccurate particulars of income so as to levy penalty u/s 271(1)(c). The Hon’ble Calcutta High Court in the case of CIT vs Madan Theatres Ltd (supra) observed that the actual amount received from sale of property was offered for taxation. It was only on the basis of the deemed consideration that the 271(1)(c) was initiated. The revenue had failed to produce any iota of evidence that the assessee actually received more than the amount shown to have been received by him. The Hon’ble Supreme Court in the case of CIT vs Reliance Petroproducts P Ltd vs CIT 222 ITR 158 (SC) observed that merely because the assessee had claimed the expenditure which was not accepted or was not acceptable to the revenue that by itself would not attract the penalty u/s 271(1)(c). In this case, admittedly, the AO has levied penalty on the addition made towards re-computation of long term capital gain of the Income-tax Act, 1961. Therefore, considering the facts and circumstances of the case and respectfully following the ratios of case laws discussed above, we are of the view that penalty cannot be levied u/s 271(1)(c) for addition made on account of difference for sale consideration as per the provisions of section 50C of the Act. The CIT(A), after considering relevant submissions has rightly deleted penalty levied by the AO. Hence, we are inclined to uphold the order of the CIT(A) and dismiss the appeal filed by the revenue.

Order pronounced in the open court on 22nd November, 2017.